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MML 40.5¢

Seek/Alpha: Explor Efforts Paying Off

  1. stevea171

    126 Posts.

    Update: Medusa's Exploration Efforts Are Already Paying Off

    Feb. 1, 2015 7:19 AM ET | About: Medusa Mining Ltd. (MDSMF)

    • Medusa Mining finds gold mineralization over a 5 kilometer corridor, upgrading the Bananghilig project to a district play.
    • This is a very positive surprise as I didn’t take this into account in the original article.
    • The investment thesis will be updated shortly; I’m just waiting for the financial results to update it in another in-depth article.
    Medusa Mining (OTCPK:MDSMF) has announced a potential breakthrough in its regional exploration efforts on its land package surrounding the producing Co-O gold mine in the Philippines. A geochem-focused exploration program (based on almost 1200 samples) has revealed a major corridor wherein gold in soil anomalies were located over a strike length of not less than 5 kilometers with the potential to add another 2 kilometers of strike length at the southern part of the corridor. This is an excellent achievement and now I'm only waiting for the financial results to update my investment thesis.

    Source: press release
    According to the company, the mineralization is both consistent and persistent in high grade gold intervals. The location of this discovery is also important as it's located less than 10 kilometers from the company's Bananghilig gold project which already contains in excess of 1 million ounces of gold and which is still open in all directions. Once the dry season starts (which is expected in April), Medusa is planning to kick its exploration efforts at the property in a higher gear as it's starting to look like the Bananghilig region could be an entire mineralized district instead of 'just' a project.

    A drill program in 2009 already encountered some decent mineralized intervals such as 7.3 meters of 2.72 g/t gold as well as 8.15 meters of 1.3 g/t gold. This is obviously relatively low-grade ore (compared to the ore being processed at the Co-O mill), but at least it gives the company a decent indication as to where it should look to increase the resource base in the wider Bananghilig region. This exploration success - although it's still early stage- increases the chances of finding and developing a second economic gold project in the Philippines. The grade is too low to truck the ore to the Co-O mill, but the project could be developed as either a standalone project (and then be combined with the existing Bananghilig project), or Medusa could simply build a concentrator, increase the grade to 6-8 g/t and then truck it to the Co-O mill. I'd personally be in favor of the second scenario as it would be quite cheap to just build a concentrator and truck the higher grade ore. Now the company should be free cash flow positive again (I'm waiting for the half-year results to write an extensive update), I do expect a lot more money to be spent on exploration activities.


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